Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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Exactly one week ago at this same time, I wrote about how AUDUSD buyers were attempting a reversal. The pair had recently fallen below wedge support at 0.7100. However, the September 12th close above 0.7150 suggested that was a false break.
As you may well know, a false break to one side of a pattern often triggers an extended move in the opposite direction. Look no further than this week’s AUDUSD rally.
I also mentioned the 0.7160 support level in last Friday’s post. By Monday, it was clear the level was closer to 0.7150. But as I’ve stated before, it’s often better to view these levels as areas or zones rather than exact prices on a chart.
Since Tuesday’s low of 0.7144, AUDUSD has rallied more than 100 pips despite coming under some pressure so far today. And there’s a clear technical reason for today’s selling pressure which brings me to the main topic of this post.
You’ll recall that falling wedge resistance extends from the year to date high carved on January 26th. Visit this post to see the pattern in its entirety.
If you draw that same level on your chart, you’ll see exactly why AUDUSD has come under pressure today. The 0.7300 handle was bound to attract sellers given the way the pair has behaved throughout 2018.
Keep in mind that although this week’s rally has stalled a bit today, the last eight months of price action hint at further gains. The false break of 0.7150 support earlier this month gives credence to that notion.
Now, there is a chance buyers will revisit the 0.7230 support area before securing a daily close at 5 pm EST above wedge resistance at 0.7300. If they do, it could present an opportunity to front run a break from the falling wedge.
On the other hand, the pair may close above the 0.7300 resistance area without much of a pullback beforehand. If it does, that would also present a chance to get long for a move to key resistance near 0.7460.
I use New York close charts, so the term “daily close” refers to the 5 pm EST close. Not all brokers offer this which is why your charts may look different from mine.
A daily close below the 0.7230 support area would reexpose 0.7150. It would also cause me to question the pair’s bullish intent as it relates to the eight-month falling wedge pattern.
Last but not least, this is a counter-trend idea. As such, you may want to reduce your usual position size if you decide to trade it or pass on the idea altogether.
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